A class-action lawsuit was filed on Sunday in the District Court of Northern California, targeting Binance.US and its CEO, Changpeng Zhao. The suit, brought by California resident Nir Lahav, alleges multiple violations of federal and California laws related to unfair competition, with claims that Binance attempted to monopolize the cryptocurrency market to the detriment of its competitor, FTX.
The lawsuit revolves around tweets made by Zhao in early November, coinciding with FTX’s apparent struggles. On November 6, Binance announced the liquidation of its holdings in the FTX utility token, FTT. It was estimated that Binance held up to 5% of all FTT tokens at that time.
The day after the announcement, Zhao took to Twitter, stating that Binance had signed a letter of intent to acquire FTX. However, the deal was abruptly canceled just one day later. According to the lawsuit, Zhao’s public announcement of the deal’s withdrawal led to a “rushed and unprecedented collapse of FTX Entities.”
The lawsuit contends that Zhao’s tweet on November 6th, stating “Due to recent revelations that have come [sic] to light, we have decided to liquidate any remaining FTT on our books,” was deemed misleading and false. The reason is that Binance had already sold its FTT holdings. The plaintiffs argue that this tweet was intentionally crafted to manipulate the market price of FTT.
The lawsuit contends that Zhao’s proposition to acquire FTX lacked sincerity and played a significant role in FTX’s subsequent downfall. It highlights the drastic decline of FTT’s value, plunging from US $23.1510 to US $3.1468, which ultimately led to the bankruptcy of the FTX Entities without sufficient chance for recovery.
Binance Navigate Regulatory Challenges
The lawsuit, based on seven counts, seeks monetary damages, court costs, and the disgorgement of ill-gotten gains. Additionally, it suggests a potentially sizable class consisting of thousands of members.
In response to the allegations, Zhao took to Twitter and clarified that the situation did not involve any attempts to undermine a competitor. Despite his statement, the cryptocurrency community continued to speculate about the underlying motivations behind these events. Weeks passed with both exchange CEOs engaging in public exchanges on the platform, fueling further discussions and debates.
However, the ongoing legal challenges faced by Binance and FTX in the cryptocurrency market become more complex with the addition of this class-action suit. They must navigate regulatory scrutiny and competitive tensions amidst these circumstances.
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